You Must Qualify

• Since Chapter 7 offers a generous escape from paying debt, the courts limit the ability of debtors to qualify for Chapter 7 protection. When you file your bankruptcy petition, you must complete various tests to determine if you should be paying your creditors back or whether you are suited for Chapter 7 bankruptcy. Essentially, your income is the deciding factor. Too high of an income, relative to the income of other state residents, typically disqualifies you. In some cases, you can qualify with a higher income if you have enough legitimate expenses to consume most of that income.
  
  

You May Have to Give Up Assets

• In addition to paying the price of Chapter 7 bankruptcy with a damaged credit report, you may also have to pay with the liquidation of your assets. One of the principles of Chapter 7 is that you shouldn't be living a life of luxury at the expense of your creditors. If you have too much personal property, you may have to settle at least a portion of your debts with that property. Your state provides a list of property that is exempt from bankruptcy liquidation, which typically includes basic household furnishings, clothing and necessary low-value property. Luxury items, such as valuable cars, boats and art collections may be used to satisfy some of your personal debt.
  
  

Your Personal Debt Must Be Legitimate

• If you are what the court terms an "honest, unfortunate debtor," you can usually get relief from bankruptcy. However, if you lie to the court, or if you incurred any of your debt using fraudulent means, the court will disallow those debts and may dismiss your entire case. For example, if you ran up charges on your credit card on the eve of filing bankruptcy, or if you continued to make credit card charges or take cash advances after meeting with a bankruptcy attorney, those debts can be non-dischargeable.
  
  

You May Still Have to Pay Some Personal Debt

• Bankruptcy law states that certain debts are "non-dischargeable," meaning you still have to pay them as if you never got a bankruptcy discharge. Usually, these types of debts include social obligations, such as alimony or child support, or debts you owe the government, such as back taxes. Thanks to the provisions of the automatic stay, you do not have to pay these debts during the course of your bankruptcy, but after your case closes, your obligations remain.